Dave & Buster’s stock rating reiterated at Buy by Jefferies despite slower Q3 start

Investing.com - Jefferies has reiterated its Buy rating and $30.00 price target on Dave & Buster’s (NASDAQ:PLAY) despite the company reporting mixed results and a slower-than-expected start to the third quarter.

The entertainment and dining chain posted second-quarter same-store sales (SSS) of -3%, which was approximately in line with investor expectations, though margins missed targets according to Jefferies. With a gross profit margin of 41.2% in the last twelve months and revenue of $2.1 billion, the company remains profitable despite challenging conditions.

Jefferies noted that new CEO Tarun Lal appears to be reinforcing a "back to basics" strategy that has shown early signs of stabilizing the business, with near-term focus remaining on growing same-store sales and free cash flow.

The research firm has tempered its estimates and now models a 10% year-over-year EBITDA decline in fiscal year 2025 for Dave & Buster’s.

Despite the near-term challenges, Jefferies projects that fiscal year 2026 could see a recovery with mid-teens percentage year-over-year EBITDA growth and building forward momentum for the entertainment venue operator.

In other recent news, Dave & Buster’s reported its second-quarter earnings for fiscal 2025, revealing a shortfall in both earnings per share and revenue compared to analyst forecasts. The company posted an EPS of $0.40, significantly below the expected $0.95, resulting in a 57.89% negative surprise. Revenue was reported at $557 million, slightly under the anticipated $565 million. Additionally, the company’s EBITDA came in at $130 million, which was $12 million below consensus estimates. This shortfall was attributed to softer comparable sales and approximately $9 million in expenses that are not expected to recur in the second half of the fiscal year. Despite these challenges, BMO Capital reiterated its Outperform rating on Dave & Buster’s stock, maintaining a price target of $35.00. These developments reflect recent challenges faced by the company but also indicate continued confidence from some analysts.

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